Thomas C. Hansard, Jr., respondent,
Federal Insurance Company, appellant. Index No. 1655/14
Wilson, Elser, Moskowitz, Edelman & Dicker, LLP, New
York, NY (Katherine E. Tammaro of counsel), for appellant.
Franklin N. Meyer, Esq., P.C., New York, NY, for respondent.
RANDALL T. ENG, P.J. RUTH C. BALKIN FRANCESCA E. CONNOLLY
VALERIE BRATHWAITE NELSON, JJ.
DECISION & ORDER
action for a judgment declaring that the defendant is
obligated under the Directors & Officers Liability and
Entity Liability Coverage Section of Policy Number 8234-3351
to defend the plaintiff in an underlying action entitled
Coley v Vannguard Urban Improvement Association,
Inc., commenced in the United States District Court for
the Eastern District of New York, under Case No. 12-Civ-5565,
the defendant appeals from an order and judgment (one paper)
of the Supreme Court, Kings County (F. Rivera, J.), dated
September 5, 2014, which, upon a decision of the same court
also dated September 5, 2014, denied its converted motion for
summary judgment declaring that it is not obligated to defend
the plaintiff in the underlying action, granted the
plaintiff's cross motion for summary judgment declaring
that the defendant is obligated to defend him in the
underlying action, and declared that the defendant is
obligated to defend the plaintiff in the underlying action
under the Directors & Officers Liability and Entity
Liability Coverage Section of Policy Number 8234-3351.
that the order and judgment is reversed, on the law, with
costs, the defendant's converted motion for summary
judgment is granted, the plaintiff's cross motion for
summary judgment is denied, and the matter is remitted to the
Supreme Court, Kings County, for the entry of an amended
judgment declaring that the defendant is not obligated to
defend the plaintiff in the underlying action under the
Directors & Officers Liability and Entity Liability
Coverage Section of Policy Number 8234-3351.
2012, an action was commenced in the United States District
Court for the Eastern District of New York against, among
others, Vannguard Urban Improvement Association, Inc.
(hereinafter Vannguard), and Thomas C. Hansard, Jr., the
Chairman of Vannguard's Board of Directors. The
plaintiffs in that action (hereinafter the underlying action)
alleged that they were employees of Vannguard and that
Vannguard and the other defendants had, among other things,
violated the federal Fair Labor Standards Act (29 USC §
201 et seq.) and the New York Labor Law with respect
to payment of wages and earned vacation benefits. The
plaintiffs later amended their complaint to add allegations
that the defendants had retaliated against them for
commencing the underlying action.
was the policyholder of an insurance policy (Policy Number
8234-3351; hereinafter the policy) issued by the Federal
Insurance Company (hereinafter FIC). As relevant here, the
policy contained a "Directors & Officers Liability
and Entity Liability Coverage Section" (hereinafter the
D & O section), which included coverage for
"Wrongful Act[s], " as that term was defined in the
D & O section of the policy. The D & O section,
however, contained an exclusion "for any
employment-related Wrongful Act." The D & O section
did not contain a definition of "employment-related,
" and that term was not defined elsewhere in the policy.
The policy also contained an "Employment Practices
Liability Coverage Section" (hereinafter the EPLC
undisputed that Hansard was an "insured" under both
the D & O section and the EPLC section.
sought a defense in the underlying action from FIC, but FIC,
in reliance on the exclusion for "any employment-related
Wrongful Act, " declined to defend him. Hansard
responded by commencing this action against FIC, in which he
seeks a judgment declaring that FIC is obligated to defend
him in the underlying action under the D & O section of
the policy. Hansard does not seek a declaration that FIC is
obligated to defend him under the EPLC section of the policy.
made a pre-answer motion to dismiss the complaint under CPLR
3211(a)(1) and (7). Hansard opposed the motion and requested
that it be converted to one for summary judgment. Hansard
also cross-moved for summary judgment declaring that FIC is
obligated to defend him in the underlying action. The Supreme
Court, upon converting FIC's motion to one for summary
judgment, denied FIC's converted motion, granted
Hansard's cross motion, and declared that FIC is
obligated to defend Hansard in the underlying action. FIC
general rule as to an insurer's duty to defend an insured
is easily stated: "the duty of the insurer to defend the
insured rests solely on whether the complaint alleges any
facts or grounds which bring the action within the protection
purchased" (Seaboard Sur. Co. v Gillette Co.,
64 N.Y.2d 304, 310; see Fieldston Prop. Owners Assn.,
Inc. v Hermitage Ins. Co., Inc., 16 N.Y.3d 257, 264).
Accordingly, in determining whether the insurer has a duty to
defend, it is necessary to determine what a policy covers and
whether any facts or grounds alleged in the complaint are
within that coverage. Courts must examine the language of the
policy and "construe [it] in a way that affords a fair
meaning to all of the language employed by the parties in the
contract and leaves no provision without force and
effect'" (Consolidated Edison Co. of N.Y. v
Allstate Ins. Co, 98 N.Y.2d 208, 221-222, quoting
Hooper Assoc. v AGS Computers, 74 N.Y.2d 487, 493;
see Fieldston Prop. Owners Assn., Inc. v Hermitage Ins.
Co., Inc., 16 N.Y.3d at 264). The unambiguous provisions
of the insurance policy must be given their "plain and
ordinary meaning"; their interpretation is a question of
law (White v Continental Cas. Co., 9 N.Y.3d 264,
the issue of whether a provision is ambiguous is a question
of law (see Greenfield v Philles Records, 98 N.Y.2d
562, 569; W.W.W. Assoc. v Giancontieri, 77 N.Y.2d
157, 162). "[T]he test to determine whether an insurance
contract is ambiguous focuses on the reasonable expectations
of the average insured upon reading the policy"
(Matter of Mostow v State Farm Ins. Cos., 88 N.Y.2d
321, 326-327). "A contract is unambiguous if the
language it uses has a definite and precise meaning,
unattended by danger of misconception in the purport of the
[agreement] itself, and concerning which there is no
reasonable basis for a difference of opinion'"
(Greenfield v Philles Records, 98 N.Y.2d at 569,
quoting Breed v Insurance Co. of N. Am., 46 N.Y.2d
general matter, when the provisions of the policy are
ambiguous, the ambiguity must be construed in favor of the
insured and against the insurer (see White v Continental
Cas. Co., 9 N.Y.3d at 267; United States Fid. &
Guar. Co. v Annunziata, 67 N.Y.2d 229, 232), especially
when the ambiguity is "found in an exclusionary
clause" (Ace Wire & Cable Co. v Aetna Cas. &
Sur. Co., 60 N.Y.2d 390, 398; see Cleary v
Automobile Ins. Co. of Hartford, Conn., 141 A.D.3d 501,
502). Indeed, "whenever an insurer wishes to exclude
certain coverage from its policy obligations, it must do so
in clear and unmistakable' language.... [Exclusions or
exceptions] are not to be extended by interpretation or
implication, but are to be accorded a strict and narrow
construction" (Seaboard Sur. Co. v Gillette
Co., 64 N.Y.2d at 311 [citations omitted]). Courts,
however, are not free to disregard the plain meaning of the
policy language to find an ambiguity where none exists
(see Cleary v Automobile Ins. Co. of Hartford,
Conn., 141 A.D.3d at 502; see e.g. Sanabria v
American Home Assur. Co., 68 N.Y.2d 866, 868). Moreover,
an ambiguity does not arise from an undefined term in a
policy merely because the parties dispute the meaning of that
term (see Mount Vernon Fire Ins. Co. v Creative
Hous., 88 N.Y.2d 347, 352).
as already noted, the D & O section of the policy did not
define "employment-related" Wrongful Act.
Nevertheless, giving "employment-related" its plain
and ordinary meaning does not result in an ambiguity. The
relevant definition of "employment" is "the
act of employing: the state of being employed"
(Merriam-Webster Online Dictionary, employment
relevant definition of "related" is "connected
by reason of an established or discoverable relation"
(Merriam-Webster Online Dictionary, related
context, an "employment-related Wrongful Act" is a
Wrongful Act "connected ...